I was curious if people who inherited a business back in the 1980's would have been better off selling it and investing the money in the S&P... Based on this I assume there are many that may have been...
Another use would be to help folks understand why people with no family wealth have a hard time keeping up.
6 comments:
Depends on the business and the investment. Lots of people who have their capital tied up in business are essentially buying themselves a job. The capital appreciation of their business just isn't that great. Think about the media business. Newspapers just aren't as valuable as they used to be. The Sulzberger family, among the most successful, would have been better off if they had put their money into something other than the Times. In comparison, early investors in Berkshire Hathaway are incredibly wealthy.
Something I have noted often and complained about occasionally, that where we are in capitalism today is exemplified by the Romney family. George Romney made a pretty good living making cars. Mitt Romney made a vast fortune creating tax shelters. That's why all the real jobs have moved elsewhere. You can see it in the life of Donald Trump. His dad made a vast fortune manufacturing homes. Donald has mostly lived off a tax loss he generated in the late '90s.
--Hiram
Yes, mine was a very very simplified comparison.
A person usually stills needs something to do and a way to earn money.
Extremely wealthy people do not earn their wealth from their jobs, in the sense of being paid really well. This is something not well understood by politicians for example who see generation of wealth as a zero sum game. They seem to think Jeff Bezos is rich because he pays himself a high salary with money that could otherwise be paid to warehouse workers.
--Hiram
Actually that seems to be the "Progressive" position.
And it is somewhat correct... Amazon generates big profits now, so people like us want to invest in it to get our share... That drives up the value and Jeff's wealth...
If Amazon paid more and had lower profits, we would not want partial ownership so the stock price and Jeff's wealth would be less.
And if like Sears, costs were allowed to get too high... All the jobs would go away.
Actually that seems to be the "Progressive" position.
Political people don't seem to understand business or economics. That helps to explain why so many people things that Trump is a good businessman.
For a number of reasons, Amazon is a politically fraught company. For one thing, it is incredibly disruptive undermining as it does, more established companies which have strong political constituencies.
Sears had an outmoded business model. It was essentially a real estate business that had low margin stores on it's often expensive real estate. How could it compete with a company like Amazon, which doesn't have much real estate, and is otherwise able to minimize the real estate costs it does incur?
--Hiram
And yet Target, Walmart, etc still thrive...
Yes Sears did have an outmoded model and too many costs.
If a company does not protect it's profits by adapting...
It also becomes a fossil for the museums.
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